DISCOMs’ Claim of Force Majeure For Curtailing & Not Paying for Renewables, Null and Void

Any curtailment for reasons other than grid safety will be considered deemed generation


The Ministry of New and Renewable Energy (MNRE) has reiterated that the “must-run” status of renewable energy projects remains unchanged during the COVID-19 lockdown period and curtailment or renewables other than for grid safety reasons would amount to deemed generation.

Deemed generation means the energy which a generating station was capable of generating but could not generate due to various reasons (curtailment in this case). So, if the DISCOMs curtail power for reasons other than grid security, they will still have to pay for the scheduled capacity of that renewable energy project under the deemed generation clause.

Some of the distribution companies are still resorting to the curtailment of renewable energy without any valid reasons, the MNRE noted in its order.

Meanwhile, Solar Energy Corporation of India Ltd (SECI) has written to 24 distribution companies and agencies, underlining the government’s notification on ‘must-run’ status and payment realization, and invoicing of renewable power projects.

Given the recent deviations on the existing renewable energy policies, SECI said that any notice regarding the Article-7 (which refers to force majeure) of signed power sale agreement (PSA) would be treated as null and void due to the directions issued by the central government. It also reiterated that the invoicing of renewable energy power projects should be done until the lockdown period following the Coronavirus outbreak.

Recently, the MNRE had issued a clarification regarding payment to renewable energy generating stations during the moratorium provided to DISCOMs by the Ministry of Power.  The MNRE had granted a ‘must-run’ status to renewable energy generating stations and stated that the status would remain unchanged throughout the lockdown period.

Earlier, the Ministry said that since the DISCOMs have already been given enough relief and the electricity from renewable generating stations comprises only a minor portion of the total electricity generation in the country, the payments to these renewable generators should be made regularly.

The Ministry of Power earlier gave a directive that the central public sector undertaking (CPSU) generation and transmission companies will need to continue supplying electricity, even to DISCOMs, which have substantial outstanding dues to the generation companies. As per the announcement, in the current emergency, there will be no curtailment of supply to any DISCOM. The Ministry also directed the Central Electricity Regulatory Commission (CERC) to provide a moratorium of three months to DISCOMs to make payments to the generating companies and transmission licensees and not levy any penalties for late payments. The Ministry also requested the state governments to issue similar directions to state electricity regulatory commissions (SERCs).

However, some states have said that they cannot pay and have invoked force majeure.

For instance, the Punjab State Transmission Corporation Limited (PSTCL) has announced the curtailment of power under force majeure clause (outbreak of COVID-19) from the projects generating renewable energy until the pandemic lasts.

Similarly, the Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL) has also sought refuge under the force majeure clause due to the pandemic outbreak and the subsequent nationwide lockdown.

Following the lockdown order, all the distribution companies operating in the state of Uttar Pradesh are faced with an imposing challenge of a substantial reduction in collections. According to a notice released by the Uttar Pradesh Power Corporation Limited (UPPCL), the massive disruption in economic activity due to the lockdown is likely to affect a significant proportion of consumers’ capacity to pay electricity bills on time.

Meanwhile, the Madhya Pradesh Power Management Company Limited (MPPMCL) states that it is constrained to invoke the provisions of the force majeure clause under the power purchase agreement, and the current events on nationwide lockdown may be termed as the force majeure events affecting the obligations of MPPMCL under the PPA. Further, due to the fall in the collection of revenues, even the payment of the power purchase bills of the scheduled capacity may also be delayed.

The economic and social repercussions of the ongoing pandemic have started to hit India, and the power industry is grappling with lower collections, subdued demand, and difficulty in operationalizing assets. You can track the latest updates related to the impact of COVID-19 on renewable and power industries here.